Loss Mitigation / Foreclosure Consultants Beware of New Laws

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The following list is not exhaustive. Please check with your State Attorney General and or State Representative for the most up to date information on real estate legislation.
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State of California:

The following links may be of assistance to you concerning California Pre Foreclosure laws .

California law governing Preforeclosure Sales is Civil Code Sections 1695-1695.17 and Civil Code Sections 2945-2945.11

http://www.dca.ca.gov/legal/m-1.html

http://www.methvenlaw.com/Handout_Preforeclosure_sales.html

State of Colorado:

Press Release
Tuesday, May 30, 2006

House Bill 1323 - mortgage fraud and Senate Bill 71 - foreclosure fraud
"Mortgage and foreclosure fraud are among the most cynical crimes imaginable. These criminals prey on the American dream, taking advantage of Americans' desire for a home to call their own," Owens said.

House Bill 1323, sponsored by Rep. Rosemary Marshall (D-Denver) and Sen. Ken Kester (R-Las Animas) establishes a minimum fine, based on the pecuniary harm resulting from the theft, for conviction of mortgage fraud, places the crime under the jurisdiction of both the state Attorney General and district attorneys, and forbids plea agreements that do not include an order of restitution.

Senate Bill 71, sponsored by Senator Jennifer Veiga (D-Denver) and Rep. Tom Massey (R-Poncha Springs) helps protect homeowners who are facing foreclosure from being victimized by predatory business schemes.

The new law requires that all transactions between homeowners and foreclosure consultants or equity purchasers be in writing, prohibits consultants who provide advice or assistance from acquiring any interest in the homeowner's property, and calls for a three-day "cooling off" period, during which an equity purchaser may not record any deed or in any way transfer or encumber the homeowner's property.

State of Indiana:

April 20, 2006

Indiana Targets Real Estate Fraud
I’m headed to Indianapolis, Indiana, in a few weeks to keynote this event. In the meantime, I’m glad to hear that the Mayor of Indianapolis, Bart Peterson, and the state’s Attorney General, Steve Carter, are making plans to crack down on foreclosure-related fraud. According to my sources in Indiana, changes to state law will soon provide homeowners with significant protections from those “We Buy Homes” scams.

As we all know, there are people out there who prey on families who’ve fallen on hard times–namely, ‘foreclosure consultants’ who target homeowners who have been threatened with foreclosure. In a typical foreclosure-consulting scheme, homeowners pay consultants with hopes that the consultant can stop or delay foreclosure on their home. In reality, the consultant does not pay the mortgage, and the original homeowner ends up losing the home in spite of the fees paid to the consultant’s company.
Indiana’s new rules governing foreclosures will empower homeowners with more information and place disclosure requirements on companies that engage in foreclosure-related activities.

Starting July 1, 2006, Indiana law governing foreclosure rescue would:

Require significant written disclosures to inform homeowners about critical aspects of
the services they are purchasing.

Provides homeowners with a 3-day right to cancel an agreement with a foreclosure consultant.

Prohibits a company/individual from obtaining power of attorney from the homeowner.

Requires foreclosures consultants to obtain a surety bond of at least Twenty-five Thousand dollars ($25,000).

The new rules, which were officially put into place by Indiana House Enrolled Act 1114, increase penalties and enforcement abilities for consumers harmed by fraudulent foreclosure consultants. Specifically, the new rules allow a person damaged by a violation to bring an action to recover the greater of two times (2x) the amount of actual damages and attorney’s fees, and bring an action against the consultant’s bond to recover an amount equal to that of the damages.

State of California:
State of Missouri:

In California, lawmakers have responded with legislation strictly controlling activities of "Mortgage Foreclosure Consultants," a group broadly defined to include anyone who offers to help to parties in foreclosure in exchange for compensation. See CAL. CIV. CODE § 2945 et seq. Missouri has a statute, MO. ANN. STAT. § 407.935 et seq. (West 2001), which defines the term "foreclosure consultant" and expressly provides that an owner has the right to cancel a contract with a foreclosure consultant at any time within the three-day period after the property owner signs the contract. See generally Josiah L. Kibe, Comment: Closing the Door on Unfair Foreclosure Practices in Colorado, 74 COLO. L. REV. 241 (2003) (describing the increased use of "foreclosure consultants" by homeowners facing foreclosure of their homes, and the efforts of the courts and state legislatures to address consumer complaints of unfair practices by such consultants). Even without such laws, judges find ways to protect owners who may have been prey in foreclosure. This may show itself as greater willingness to entertain claims of fraud, forgery, undue influence, duress, want of advice or -- as in the London case, supra -- unequal bargaining power coupled with inadequacy of consideration. The moral of the London case may be that mortgagors in dire straits should be very careful when asked to work with known "foreclosure consultants." They may charm your socks off -- but then you won't have socks.

-end of guide

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